David Cameron came under intense pressure from America last night to call an
inquiry into Gordon Brown's role in the controversial release of the
Lockerbie bomber.

Senior US politicians accused the former prime minister of "cutting deals to release terrorists" after an official report detailed how ministers pushed for the release of Abdelbaset al-Megrahi.

The criticism was made after Sir Gus O'Donnell, the Cabinet Secretary, admitted that Mr Brown's administration did "all it could" to help Libya amid fears that British companies would lose multi-million-pound contracts if Megrahi died in prison.

Mr Brown had previously said the release of the terrorist was a decision made solely by the Scottish Executive. The report backed this assertion but also detailed how the Labour government advised Libya about how best to secure the release.

The official admission came less than a week after The Daily Telegraph disclosed that a Foreign Office minister had privately advised Colonel Gaddafi's Libyan regime on how they could secure Megrahi's compassionate release from prison.

Yesterday, Sir Gus said: "Policy was … progressively developed that Her Majesty's Government should do all it could … to facilitate an appeal by the Libyans to the Scottish government for Abdelbaset Ali Mohmed al-Megrahi's release under the Prisoner Transfer Agreement (PTA) or for release on compassionate grounds. Such an approach was understood across all relevant departments."

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In a statement to MPs yesterday, David Cameron said it had been "profoundly wrong" for the government to help the Libyans free Britain's worst mass murderer, who bombed Pan Am flight 103 over Lockerbie in December 1988 with the loss of 270 lives.

The Prime Minister also attacked Labour for misleading the public and Parliament at the time by insisting they had no stance on the release, which was approved by the Scottish Executive.

The disclosures also attracted international condemnation, with US senators and relations of the bomber's American victims accusing the British government of being "corrupt and totally immoral".

Robert Menendez, a Democratic senator for New Jersey who sits on the Senate foreign relations committee, demanded that Mr Cameron call an inquiry. He said: "The UK didn't just turn a blind eye to Megrahi's release – they cut deals that set the terrorist free.

"The UK and Scottish governments' repeated denials, even when confronted by specific and compelling evidence, get more ludicrous by the day. It is time that these governments launch independent investigations and put the wheels in motion to return Megrahi to prison."

Chuck Schumer, the influential senator for New York, added: "This report confirms what many of us have long suspected: the British government and BP wanted Megrahi released so that an oil deal being negotiated with Libya could go forward."

Susan Cohen, 72, whose 20-year-old daughter Theodora died in the bombing, said: "These documents show again that the British government was so cynical, so corrupt and so totally immoral. It had nothing to do with compassion and all to do with business interests. Britain was the country that stood up to the Nazis. There used to be certain British values. They don't seem to matter any more – it's just 'sell to the highest bidder'."

The 142-page dossier of government letters, memos and minutes disclosed the full extent of Labour's role in the terrorist's release. It was published after the Prime Minister promised President Barack Obama a review of all the paperwork linked to the case.

The documents show how Labour ministers were instructed to advise the Libyans on how to secure the bomber's freedom either on compassionate grounds or using the PTA promised by Tony Blair.

Sir Gus said the government had been "primarily motivated by a desire to build on previous success in normalising relations with Libya and to safeguard the substantial gains made in recent years", and specifically Britain's commercial interests. The Libyans made clear these would be "damaged" if Megrahi was to die in a British prison as they would regard this as a "death sentence", Sir Gus said.

Kenny MacAskill, the Scottish justice minister, eventually released Megrahi on compassionate grounds in August 2009 on the basis that he had less than three months to live. He remains alive in Libya more than 17 months later.

But Sir Gus, who is Britain's most senior civil servant, said there was no evidence that Mr Brown and his ministers tried to influence Mr MacAskill.

Although Sir Gus's report is a detailed account of Britain's role, minutes of key meetings with the Libyans are not included and the main aides and ministers negotiating with the regime were not interviewed. Therefore, the US Senate is expected to reopen its inquiry into the release and demand that British officials and ministers appear as witnesses if Mr Cameron does not agree to an independent inquiry. The Prime Minister has declined to do so, insisting there was nothing to show that ministers or BP pressurised Mr MacAskill.

In a parliamentary statement, Mr Cameron said: “Was it really right for the British government to facilitate an appeal by the Libyans to the Scottish government in the case of an individual who was convicted of murdering 270 people? That for me is the biggest lesson of this entire affair. For my part, I repeat, I believe it was profoundly wrong.”

He also attacked Mr Brown for failing to disclose full details about the Labour government’s role in the release.

Last night, Mr Brown defended his role. He said in a statement: “The report’s conclusions confirm the accuracy of the statements I and the then foreign secretary made at the time of the Megrahi release. I made it clear to Colonel Gaddafi that any decision on Megrahi could not and would not be a British government decision but, by law, a Scottish ministerial decision. As the report states, I recognised that any decision was a quasi-judicial matter, to be made by the Scottish minister alone.”